Advanced BioFuels USA

by Nicolas Loris (DownsizingGovernment.org/The Heritage Foundation)  … The problem is not with the voluntary use of biofuels in the marketplace, but rather policies that mandate and subsidize biofuels. …

Congress should end its intervention in the biofuels industry. It should terminate subsidies and repeal the Renewable Fuel Standard. Individuals and markets can make more efficient and environmentally sound decisions regarding biofuels without subsidies and mandates.

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The federal government distinguishes between conventional (first-generation) biofuels and advanced (second-generation) biofuels, including cellulosic ethanol. Producers create advanced biofuels from nonfood parts of crops and other biomass such as leaves, switchgrass, algae, and woodchips. However, developing commercially viable fuel from these sources has proven to be very difficult.

Federal Biofuel Policies

The federal government has supported biofuels for decades. Republican and Democratic administrations and congresses have put in place a variety of subsidies—including tax credits, import tariffs, grants, loans, and mandates—to increase the production, sale, and use of biofuels.

In response to the oil crisis of the 1970s, Congress passed the first ethanol tax credit in the Energy Tax Act of 1978. Later legislation, including the Biomass Research and Development Act of 2000, the Healthy Forests Restoration Act of 2003, and the American Jobs Creation Act of 2004, introduced or expanded subsidies for biofuels. Farm bills in 2002, 2008, and 2014 also added and expanded biofuel programs. Today, there are at least 11 different federal subsidy programs for biofuels providing loans, grants, and other benefits.⁶

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One problem is that cellulosic biofuel is supposed to be 44 percent of the total mandate by 2022, but actual production of these advanced fuels is far below expectations and running into major technical setbacks.⁸

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Used at a modest level, ethanol is a cost-effective oxygenate for gasoline, meaning an additive that improves efficiency and helps meet fuel emissions requirements. A study by the University of Tennessee Institute of Agriculture estimated that with no RFS and no ethanol tax credit, demand for corn ethanol would have been 4.3 billion gallons in 2014, or about 30 percent of actual corn ethanol production that year.¹³

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Carl Icahn, who is a part owner of a refinery that is bearing heavy costs, complained that “a shadowy, unregulated trade in electronic credits called Renewable Identification Numbers (RINs) threatens to destroy America’s oil refineries, send gasoline prices skyward and devastate the U.S. economy.”⁴⁶ Icahn wants policymakers to reform the RFS, but for all the reasons discussed here, it should be completely repealed.  READ MORE and MORE (Ethanol Producer Magazine)